Question

A $150,000 loan has monthly interest-only payments of $1,000. Its annual interest rate is

a. 3%.
b. 6.5%.
c. 8%.
d. 12.5%.

Answer 1

The annual interest rate for the $150,000 loan is 9.6% (option C).

Step-by-step explanation:

To determine the annual interest rate for the $150,000 loan with monthly interest-only payments of $1,000, we can use the formula:

Annual interest rate = (Monthly payment / Principal loan amount) * 12 * 100%

Plugging in the values, we get:

Annual interest rate = (1000 / 150000) * 12 * 100% = 0.8% * 12 * 100% = 9.6%

Therefore, the correct answer is 9.6% (option C).